BANGALORE | MUMBAI: Land transactions, a catchment sector for unaccounted currency, have seen a sudden freeze following the government’s ban on high denomination notes to clamp down on black money, but, pacts involving joint ventures (JV), joint development (JD) or corporate land divestments are also likely to see an impact.

“JVs, JDs and corporate divestments are all quite institutionalised, with little or no cash involvement. However, those carrying out direct land deals will doubtlessly suffer — especially when it comes to farm land transactions, which tend to involve significant cash component. Land transactions slowing down or failing to materialise could lead to a bigger cash crunch for many developers and force them to sell their land at lower rates,” said Anuj Puri, chairman, JLL India.

Developers are already shunning outright purchase of land for new projects to avoid blocking funds to be paid up front. In order to spur a market combating a slowdown of the past few years, developers are forming joint ventures with strategic investors as well as amongst themselves.

Such JVs are gaining momentum not only in a bid to raise capital during the current financial crunch, but also to pool resources and to bring credibility and expertise in delivering projects.

“No doubt there will be reduction in land deals. However this will be a temporary phenomenon as economy is growing. Demand for developable lands is also moving up. Tier II and III cities will bear the maximum brunt as many speculative investments were made there earlier,” said Anshuman Magazine, chairman, India and South East Asia, CBRE.

“There are very few buyers for large land parcels. The joint development models bring in immediate liquidity and are a capital light model. It helps builders concentrate on construction funding which is cheaper than funding for land acquisition,” said Ravindra Pai, MD, Century Real Estate Holdings.

Tata Housing is seen signing a development management agreement with NCR-based developer Lotus Greens to build a housing project in Noida, marking its entry into the region.

Mumbai-based Radius Developers recently tied up with Deserve Builders for an integrated township spread over 40 acres in Chembur, Mumbai. Bengaluru based Cornerstone Properties recently tied up with Embassy Group and Brigade Enterprises for commercial and residential properties sin the city.

“There won’t be a major impact on land deal due to demonetisation as large land deals have not been happening for over six years. Builders are consolidating and are focusing more on execution and completion. Nobody seems to be interested in land banking,” said Rajeev Talwar, CEO, DLF and chairman of realtors’ body NAREDCO.

Debt-laden developers in the country’s key property markets — Mumbai, Bengaluru, Chennai and the National Capital Region (NCR) — have been struggling with slow sales, high unsold inventory, delayed construction and stalled projects.

ET View: Bring Real Estate Under GST

A slowdown in the realty sector is not good news for the economy. However, the sector is also a sink for black money, and needs to proper regulatory oversight. Low uniform stamp duties across states will help tax evasion. Ditto for bringing real estate under the goods and services tax. Builders and contractors would be able to take input tax credit for material that is used in construction, and reduce the cascading burden of taxes.